Drudge has the big splash, and I can already sense the usual suspects warming up the chorus for cries of “Evil corporations!” Hell, this might even be the long-awaited October Surprise. Take a look:
Google Inc. cut its taxes by $3.1 billion in the last three years using a technique that moves most of its foreign profits through Ireland and the Netherlands to Bermuda.
Google’s income shifting — involving strategies known to lawyers as the “Double Irish” and the “Dutch Sandwich” — helped reduce its overseas tax rate to 2.4 percent, the lowest of the top five U.S. technology companies by market capitalization, according to regulatory filings in six countries.
“It’s remarkable that Google’s effective rate is that low,” said Martin A. Sullivan, a tax economist who formerly worked for the U.S. Treasury Department. “We know this company operates throughout the world mostly in high-tax countries where the average corporate rate is well over 20 percent.”
The U.S. corporate income-tax rate is 35 percent. In the U.K., Google’s second-biggest market by revenue, it’s 28 percent.
Lesson unlearned: Higher tax rates do no necessarily generate higher tax revenue. Again and again we fail to remember this simple fact.
How much does Google pay fancy accountants and lawyers to avoid paying confiscatory US and British taxes? How much of Google’s savings gets eaten up in currency transactions and fluctuations? There’s another — bigger — story in those questions, but chances are it won’t get reported.
Make the tax code simple. Make the tax rate low. Increase revenue.